Practical implications of different modes of creating charge and in particular different types of mortgages both a borrower and a lender ought to know

Prof. A.K. Paul* MBA (Finance), M.Com, LL.M,

C.A.I.I.B, A.I.B Part I (London), Cert. in Industrial Finance,

Senior Lecturer, ACCMAN Institute Of Management, Greater Noida

Prof. (Dr.) Pawan Kumar**Assistant Professor,

ACCMAN Institute of Management, Greater Noida

Introduction:

Charging a security, which should be readily realisable, safe, marketable and properly charged to the lending banker, means making it legally available to the lender/banker as cover for a loan/advance. In such cases, the creditor gets certain defined rights in the assets charged until and unless the advance is repaid/ liquidated; the (absolute) ownership remains with the borrower Sec 100 of Transfer of Property Act,1882. This basic and fundamental knowledge a person of ordinary prudence should have in order to avoid legal difficulties in future.

Objective of the study

The main objective of this study is to make the readers aware of the legal aspects of charge creation and especially to equip them with the knowledge of different classes of mortgage so that a person of ordinary prudence, a banker (lender) and would be borrower do not land into troubles in their dealings with one another.

Different types of charges are

1. Lien2. Assignment 3. Pledge4. Hypothecation5. Mortgage

Different types of Mortgages are1. Simple /Registered Mortgage2. Mortgage by conditional sale3. Usufructuary Mortgage4. English Mortgage5. Mortgage by deposit of title deeds6. Anomalous Mortgage

Lien

1. Right of retention

It means the right of retaining the Goods/Securities until a debt due by a debtor is paid to the creditor (retainer), provided there is no agreement (express or implied) contrary to this.

2. Banker’s Lien

It is more than ordinary possessory lien. It is an implied (unwritten) pledge. It does not transfer the property or right of legal ownership. It is a statutory and defensive right and does not require any separate agreement. In case of pledge, a Banker can avail of the right to sell on default.

A Banker has a general lien over all forms of securities or negotiable instruments deposited by or on behalf of the customer in the ordinary course of banking business and that the right of general lien of the Banker is judiciously recognised.

3. Money

Banker’s lien is applicable to goods and securities. It does not extend to money deposited with the banker (right of setoff is available in case of money because money deposited cannot be construed as goods or securities). The right of lien cannot be extended to money paid in by a third party by mistake. Money deposited in fixed deposit does not constitute bailment under section 171 of contract act. Bank cannot press into service banker’s lien. The bank can exercise the right of set-off (as there is no prohibitory order preventing the bank to do so).

4. Restrictions

The possession of the goods/securities must be lawfully obtained by the banker in his capacity of a banker (and not as bailee) in the normal course of business. Goods/securities left with the banker by mistake cannot be the subject matter of lien. The right of sale is not available in the case of title deeds of immovable property which can only be retained.

5. Liquidation of loan

The banker can exercise his right of general lien on securities (e.g. gold ornaments etc.) remaining in his possession, after full liquidation of the loan by the borrower for which they were lodged, if no contract (express/implied) to the contrary exists. This rule is applicable even in respect of the borrower’s obligation as a surety.

No criminal prosecution for the offences under section 409 or 420 of Indian penal code can lie against Bank officials for such retention, as there is no criminal intent.

6. Law of limitation

The banker’s right of general lien over the security is not barred by the law of limitation. It can be exercised in the case of unenforceable or time-barred debts also (e.g. in the case of gold loan). But if securities do not cover the outstanding fully, the lending banker cannot file a civil suit for recovery of the shortfall in such cases.

Negative lien

1. Possession

It means the goods/securities are not in the possession of the creditor (Non-possessory lien). The debtor gives an undertaking that he will not create any charge on the unencumbered securities, or will not encumber them without the prior, written, express permission of creditor (the bank).

2. Undertaking

A letter of undertaking on prescribed form stamped as an agreement is obtained from the borrowing company. The company undertakes not to create any further charge (such as lien, pledge, hypothecation, mortgage, encumbrance, etc.) over its properties and assets (immovable/movable) including uncalled capital.

3. Registration

Negative lien does not require registration with the Registrar of Companies as it is not a charge under section 125 of the Companies Act.

Set-off

1. Statutory right

It is a statutory right of creditors for adjusting wholly/partially the debit balance in the borrower’s account with any credit balance lying in his account (i.e. where the relationship between the banker and customer is that of debtor creditor), provided no agreement (express/implied) to the contrary exists (i.e. there should be no contract inconsistent with the right of set-off). The bank’s right to set off to realise their dues is beyond doubt.

2. Capacity

This enables the banker to combine the accounts (deposit account and loan account) of the same person which are in the same name and in the same right (i.e. the capacity of the account holder in both/all accounts must be same on the principle that one man’s funds cannot be utilised for paying off another man’s debts). The right of set-off cannot be exercised on money deposited for specific purposes (e.g. issuance of draft, TTS etc.) as per section 59 of Indian Contract Act.

This must be done only after serving a reasonable notice on the depositor-borrower otherwise the banker may be held liable for the damages for wrongfully dishonouring any cheque drawn on the account.

Joint accounts

A banker has no right to combine a customer’s personal account with a joint account of the customer and another person.

Identical firms

In the case of identical firms the banker can exercise the right of set-off i.e. he can appropriate the money belonging to a firm for liquidating an overdraft to another firm.

Guarantors

In the case of guarantors, specific letters of authorisation/appropriation must invariably be obtained.

3. Future debts

The right of set-off cannot be exercised in respect of future/contingent debts. The debts must be actually due from the customer recoverable and ascertained.

4. Different branches

For the purpose of set-off, all the branches of the bank are treated as one single entity but the customer has no right to require the bank combine the different accounts in determining whether a cheque on the account may be returned.

5. Garnishee/Attachment order

The banker has right to exercise the right to set-off before the court attachment order (garnishee order) is made effective.

6. Law of Limitation

In the case of time barred (statute barred) debt, the bank can exercise the right of set-off, provided both the deposit and the loan accounts are in the same name and right (as the effect of limitation is to bar the personal remedy to recover a debt by filing a civil suit and not to discharge/ extinguish the debt). The relationship of debtor-creditor continues till the lending bank’s dues are paid in full.

7. Insolvents

In the case of insolvent depositors and the companies in liquidation, the bank’s right of set-off is subject to provisions of section 47 of presidency towns insolvency Act (which are also applicable to such companies vide section 529 of companies Act).

8. Criminal proceedings

The concerned official of the lending bank cannot be charged with criminal breach of trust under section 409 of IPC for exercising the right of set-off (because of the debtor-creditor relationship between banker and depositor and that there is no entrustment of property or dominion over property).

Adjusting time barred debt from the security (term deposit) furnished by the guarantor does not amount to criminal breach of trust or misappropriation.

Action in terms of the contract express or implied is a negation of criminal breach of trust. It is neither dishonest nor misappropriation.

Assignment

1. Definition

It is transfer of debt (existing/future) right or property belonging to a person in favour of another person section 130 of transfer of property Act 1882. (The third parties are not legally bound to acknowledge the receipt of notice of assignment and to confirm the debt).

2. Applicability

Only actionable claims (chose in action) such as book debts – LIC policies and supply bills (representing money due from govt. departments) are charged to the bank by way of assignment.

3. Rights

The assignee gets absolute right over the money/debts assigned to him. The other creditors of the assignor (borrower) do not get priority over the assignee.

4. Equities

The transfer of debt right or property is subject to all the liabilities and equities to which the transferor (assignor) was subject on the date of transfer. Section 102 of the transfer of property Act says that the assignee cannot get a better title than that of the assignor.

Pledge

(A) Definition

Pledge (pawn) is bailment or legal delivery of goods (movable assets other than actionable claims and money as per section 2(7) of sale of goods Act 1930) or mercantile documents of title to goods by the debtor with the intention of creating a charge thereon as security for the advance vide section 172 of Indian contract Act.

The legal ownership of securities remains with the pledger, subject to certain defined interest of the lending banker.

Possession

It may be actual/physical/manual or constructive/symbolic (i.e. right to possession). The bank’s lock on the go-down, handing over of mercantile documents of title to goods (e.g. railway receipt/ motor transport receipt) to the lending bank (as the goods are in constructive possession of lending banker).

2. Lock & Key, factory type pledge

The lock and key system has a profound disadvantage that it immobilises trade or credit. Stocks in process are generally not possible to pledge (under lock & key system) as these deteriorate at a faster rate.

(B) Go-downs, storage arrangements

1. Go-downs

In is preferable to select first class go-downs with independent access. Go-downs should be safe and secure. All entrances/exits to the go-down should be properly locked with the Bank’s pod locks. These should not contain any goods other than those pledged to the Bank

Care should be taken to protect the pledged goods from theft, pilferage, sun, rains, damage by the rats, insects, weevils, white ants, fungus, dampness etc.

The go-down number should be painted prominently on the doors of the go down and the bank’s name boards/plates (with emblem) affixed outside and inside the godown.

2. Suitable storage

Go downs with tiled or corrugated iron sheet roofs, cement or stone flooring, damp proof / moisture proof construction, adequate arrangements for ventilation storage in ware houses, approval from central excise authorities etc, Painting of interior surface of walls, floors and ceiling with an insecticide before effecting storage, packing in sealed tins, storage in gunny bags, stocking in factory packed bundles, coating of go-downs with tar, fully pressed bales, air-tight bottles, sealed drums, mill-packed cases should be provided for.

3. Name boards

The bank’s name board/plate (with emblem) should be affixed inside the go-down also.

4. Go-down locks (with bank’s name engraved thereon)

These should be changed yearly (so that these are not tampered with or duplicate keys prepared by the unscrupulous borrowers) under no circumstances, the keys of go-downs should be handed over to the borrowers.

5. Go-down keys

The keys of the pad locks put on go-down should be retained in a locked box/receptacle in the branch strong room. The keys of the box/ receptacle being retained by the Branch manager/ Manager. These should be made available to the Bank’s authorised employee only when the relative go-downs are required to be opened.

6. Go-down cards

The details of the stocks stored in the go-down should be recorded in the go-down cards. The card should be prominently displayed in each go-down and kept up to date.The details recorded in the go-down card and the go-down register maintained at the branch should be identical.

7. Go-down keeper’s salary

When go-down keeper/watchman is posted exclusively for a single borrower to look after his go-down’s day-to-day operations, his salary and allowances should be recovered in full from the concerned borrower.

(C) Order of priority/charge

1. Crown debts

If the pad-lock of the go-down containing the pledged goods is broken by the govt. authorities and goods confiscated /seized by them for recovering the revenue dues the govt. should pay the amount due to the pledgee bank as a lending banks charge has priority. The rights of lending banker are not extinguished/ adversely affected by the lawful seizure of pledged stocks by the govt. departments. Govt. is entitled to claim priority for arrears of income tax dues to it from a citizen over the amount due from him to unsecured creditors. This rule of priority in favour of the crown for realisation of its dues can only prevail and be enforceable as between unsecured creditors of equal degree. It has no application where there is any lien, charge (including pledge) or mortgage.

2. Claims of others creditors

The movables cannot be attached and sold for satisfaction of claims of other creditors (or power) of the borrower without first satisfying the claim of the bank.

3. Order of priority

If the account of borrower becomes sticky, the salaries of workers should be paid first, thereafter the dues of the pledgee banker.

(D) Loss/theft/deterioration

1. Banker’s responsibly

Contract exempting the bailee (lending banker) on account of negligence, fault or carelessness is not illegal in absence of such a contract, the bailee is bound to take care as a prudent man.

A paid bailee (lending banker) must use the greatest possible care and is expected to employ all precautions in respect of the goods deposited with him.

2. Loss/deterioration

In the case of lock & key advances, the lending banker should ensure that there is no loss or deterioration in the quality/quantity of the securities pledged to the bank as cover for the advance.

3. Theft

In the case of theft/surreptious removed of goods pledged to the bank, the bank is sufficiently protected under section 151 and 152 of Indian contract Act, provided it has exercised its duties as a bailee as laid down in section 151.

(E) Pledge : other legal aspects

1. Nature of the charge

The pledge of goods on the company’s assets is a specific/fixed charge. Therefore it does not require registration with the Registrar of companies as per section 125 of companies Act.

2. Right of redemption

The pledger has the right of redemption (i.e. getting back the pledged goods after liquidation of the bank dues in full) as per section 177 of contract Act.

3. Subsequent advances

Subsequent advances made to the pawner (pledger) by the Pawnee (pledgee) are also covered by a Pledge of goods/securities pledged for a specific debt, unless there is a contract to the contrary vide section 174 of Indian contract act.

4. Other transactions

Bankers can retain as a security for a general balance of account any goods bailed to them.

Retention of pledged goods (by bank pledgee) as security for other transactions not connected with pledge for which the pledger stood as surety, does not amount to criminal breach of trust on the part of the bank.

5. Reconstitution of partnership firms

Pledged goods held as security should not be released without notice to the erstwhile partners as they are entitled to the benefit of the security. If the goods are released without such notice the bank is held liable for negligence enabling the erstwhile partners to claim discharge to the extent of the value of the pledged goods.

Sale of pledged goods

1. Public auction

The pledgee of the goods is not bound to sell them by public auction. The bank can sell them by private treaty or by inviting tenders at its (sale, absolute and unqualified) dis-creation.

Sale by public auction is desirable (as the chances of the bonafides of such sales being questioned/ challenged at a later date by the borrower/guarantor/third party/creditors in a court of law are remote.

2. Reasonable notice

The right of sale should be exercised only after giving the borrower a reasonable, clear and specific notice (say a fortnight’s notice ) of sale of the pledged goods (without the intervention of the court of law) as per section 176 of contract act. The notice cannot be waived by mutual consent

If the notice is not given the lending banker is liable for conversion (damages for wrongful sale). The auction notice should be published in at least one english and one vernacular daily having the largest circulation locally.

In the case of partnership firms the notices of sale should be served not only on the firm at its last known address but also on the partners individually. An additional copy of the notice should be despatched under certificate of posting also. If the notice of sale is refused by the pledger or returned undelivered it should be preserved un-opened.

3. Quantity for sale

Only that much quantity of goods / securities should be sold as are sufficient for liquidating the lending bank’s dues (except where the securities are indivisible.

4. Perishable goods

The pledgee baker is under no obligation to dispose of the pledged goods at the time of its own choice. The banker’s (pledgee’s) duty to take reasonable care of the goods does not extend to their disposal within the validity period (of medicines etc.) or within the period beyond which they might perish.

The duty of the bailee (pledgee banker) is to communicate to bailer/pledger (borrower) in case of emergency with reasonable diligence as per section 151 of contract act

The pledger cannot force pledgee to sell pledged goods with out clearing the bank dues even if the goods deteriorated during the pendency of the suit

Suits for recovery

1. Law of limitation

Sale of the pledged goods (within the prescribed period of limitation) does not automatically extend the period of limitation. In case of the pledge advance the lending banker has the right to dispose of the security for realising its dues even after the limitation period. The pledgee is not bound to sell the securities pledged by public auction.

2. Concurrent right

The Pawnee’s right to sue upon the debt to sell the pawn are concurrent and not alternative

The Pawnee right sue upon the debt to sell the pawn are concurrent and not alternative

3. Option for suit

The Pawnee (lending baker) can file a suit for recovery with out first selling the pledged goods

4. Recovery of shortfall

If the sale proceeds are not sufficient to cover Bank dues, a civil suit can be filed against the borrower and the guarantor (within the limitation period) for recovery of short fall/deficit.

(IV) Hypothecation Advances

1. Definition

Hypothecation is defined in none of the Acts presently in force (but it is a legal transaction). The law is not very clear on the subject.

2. Mode of charge

It is only an extended idea of pledge (equitable pledge). In the case of hypothecation advances the banker’s right to general lien can not go beyond terms of hypothecation deed.

3. Applicability

It relates to goods/commodities, movable machinery, vehicles etc. A movable property means property of every description except immovable property vide section 3 of general clause Act 1897. The book debts (present/future) can also be hypothecated like movables. The hypothecation charge can be created by any category of borrower corporate and non-corporate.

4. Ownership / possession

Neither ownership nor possession is transferred to creditor (banker). It is a bird in the bush with its full wings.

5. Constructive possession

The borrower is in actual physical or manual possession of the goods (movable assets). But the constructive/symbolic possession is with the financier bank, symbolic delivery to creditor is also known as delivery by attorment.

The borrower periodically submits to the lending banker the stock statements of hypothecated assets (stocks, receivable etc.)

In the case of hypothecation advances the lending banker (first hypothecatee) runs the risk of being superseded by a second hypothecatee or pledgee (where one of two innocent parties have to suffer for the fraud of third, that party should suffer whose negligence or conduct facilitated the commission of fraud).

Thus, more than ordinary care/vigilance should be exercised in such cases.

The hypothecation charge created by borrowers other than joint stock companies suffers from severe limitations (as there is no provision for its registration). The registration of the hypothecation charge over the assets of a company serves as a constructive notice to the rest of the world. The company should trade only in the goods covered by its Memorandum of Association.

6. Pad-locks

The Bank’s padlocks are no longer supplied for locking the factory/godown/shop of the borrower. Bank’s name boards give adequate notice to third parties. In the case of factory type pledge, the Bank’s padlocks are put on the borrower’s factory premises.

7. Equitable charge

An equitable charge (i.e. not by any express enactment but by the equity and reason) in the lending bank’s favour is created (by execution of hypothecation agreement) on the movable securities belonging to the borrower. The borrower holds the actual physical possession of the goods as an agent/trustee of the lending bank (i.e. on behalf of and in trust for the creditor)

Thus the goods are in constructive possession of the bank.

8. Priority of Crown Debt

Though hypothecation as such is not defined in the contract Act such transactions have long been recognised as valid in law and they have been given effect to. The doctrine of priority of crown debts does not automatically apply. It is applicable only when debts are of equal degree or the creditors are on equal footing. Since debt due to the bank is not an ordinary debt but a secured one, the crown or the state does not have priority over bank’s secured debt.

The hypothecation in favour of the bank is not a secured debt which could be treated in preference to the govt. dues that can be recovered as a prior charge, if the goods hypothecated are available for being proceeded against and attached for tax arrears.

9. Records

The unit should maintain accurate and up-to-date records of all stocks in its possession, including those received and delivered by it.

10. Breach of Trust

It must be ensured by the borrowers while taking deliveries of stocks that the drawings on the account (outstanding) are covered by the advance value of stocks hypothecated to the Bank.

Any shortage of the stocks is relation to the drawings on the account noticed by the Bank in the conduct of the advance is construed as a wilful breach of trust vide section 405 Indian penal code and the borrowers render themselves liable for the criminal action being taken by the bank.

11. Damage to goods

If during the currency of the advance, the quality of the goods is deteriorated, the guarantor is not released of his liability as surety.

12. Impounding/seizure (a) No force- The hypothecation agreement empowers the lending bank to take possession of the

hypothecated goods/machinery without the intervention of court. The agreement also empowers the lending bank to convert the hypothecation limit into pledge limit in the event of any default of breach of any covenant by the borrower.

(b) F.I.R – the borrower may obstruct the lending bank’s officials from taking physical possession of the securities. He may also lodge a criminal complaint (first information report) against these officials for breach of peace, trespass, wrongful entry etc.

(c) Padlock – the Bank’s padlock must not be put on the premises already locked with the borrower’s padlock.

Hypothecation advances: some useful safe guards

Risks involved

Bank has no control over the movement of stocks accepted under the hypothecation once these are surreptiously disposed of/ moved away by the borrowing unit in such circumstances.

Steps to safeguard Bank’s interests:

Detailed verification

When the account becomes sticky, the Field Officer should verify the stocks in detail during the inspection.

Appointment of Attorney/Taking possession

Where the contingencies warrant, the bank should make all out efforts to get the bank appointed as the attorney of the borrower and take possession of the hypothecated stocks well in time (in terms of general agreement).

Where this is not possible, the Bank can appoint some agencies to do the job on a fixed remuneration.

Security guard: Posting

The bank can also post security guards to protect and take care of the interests of the Bank is respect of the securities.

Appointment of Receiver

The court may also be moved to appoint a receiver for disposal of the stocks.

Criminal complaint

Where the stocks are surreptitiously sold/ disposed of and sale proceeds are not deposited in the account, a criminal complaint may also be filed against the borrower for cheating the bank.

Additional security

Additional security may be obtained from the borrowing unit where the branch feels that there is a need to take such security besides the security already available on hypothecation basis.

In order to make things amply clear, a comparative statement of different types of charges is given as under:

Security How created Is there a transfer of ownership of security?

Is there transfer of possession of security?

Is there a power of sale/transfer of the security?

Lien During the course of dealing with parties or by an instrument in writing

No Yes No, except in the case of bank’s lien (which is deemed as implied Pledge)

Assignment By a written instrument or operation of Law

Yes Yes/No depending upon the nature of transaction

Yes, security can be re-assigned

Pledge By bailment normally supported by an instrument in writing

No Yes, actual or constructive/ symbolic

Yes, after reasonable notice to the borrowers without the intervention of the court or though the court of law in case the possession of goods is not effective.

Hypothecation By an instrument in writing

No No, but normally the creditor reserves the right to take possession in certain circumstances.

Yes, with the express written consent of the borrower or through the intervention of the court only.

Mortgage By a registered instrument in writing or by deposit of title deeds with intention to mortgage

No, but a special interest passes conditionally to the lender

No, except in the case of usufructuary mortgage or anomalous mortgage with possession

Yes, except in the case of mortgage by conditional sale where the remedy is foreclosure. The power of sale can be exercised only with the intervention of the court.

(V)Mortgage

Definition –Mortgage is transfer (conveyance) of interest in the specific immovable property (real estate) belonging to the debtor in favour of the creditor (lender).

Section 3 of General clauses act says immovable property includes land, benefit to arise out of land and things attached to the earth or permanently fastened to anything attached to the earth. There is no provision for mortgage of movables.

The property should be such as can be clearly described .The legal ownership remains with the borrower. The actual physical possession of the property need not always be transferred to the creditor Vide section 58 of Transfer of property Act 1862.

Different types of Mortgages

1. Simple/Registered Mortgage

As per Section 58 (b), the mortgagor undertakes (binds himself personally) expressly or impliedly to pay the advance (Mortgage money). He does not deliver the possession of mortgaged property (non-possessory mortgage). The property can be sold only with the court intervention (permission). It always requires registration (irrespective of the amount of advance). It is got registered with the concerned Sub-Registrar/Registrar of Assurances (section 28 of Indian Registration Act). Mortgage deeds of properties valued at Rs. 100 or more attract ad valorem stamp duty.

The registration should be done within 4 months from the date of execution of the document (Sec 23 of Indian Registration Act). If the value of the property involved is less than Rs. 100 , the registration is not necessary (Section 59 of Transfer of Property Act). Simple mortgage can be created at any centre.

If the document is not presented for registration within this stipulated period of 4 months the Registrar (not sub-Registrar) may permit the registration, if the delay in presentation does not exceed 4 months. In such cases, a penalty not exceeding 10 times of the usual registration fee can be levied by the Registrar under section 25 of Registration act.

The mortgage under a simple mortgage does not have the right of foreclosure. That is the mortgagee cannot get the property permanently in his own legal right. Foreclosure means that the mortgagor absolutely loses his right to redeem (get lack) mortgaged property in the case of non payment of mortgage money section 67 of Transfer of Property Act.

2. Mortgage by conditional sale

The possession of the mortgaged property is not transferred to mortgagee. It is an ostensible sale (and not a real sale). In the case of non-payment of mortgage money, the ostensible sale becomes a real/absolute sale (i.e. the property is deemed as sold). On liquidation of the advance in full, the property is transferred to mortgagor. The mortgagee can sue for foreclosure but not for sale of mortgaged property, By foreclosure, the conditional sale becomes absolute/real.

3. Usufructuary mortgage

It is a possessory mortgage, that is, a mortgagee possesses the mortgaged property full the advance is repaid (there is no lower/upper time limit for this). Actual physical possession is not necessary.

The mortgagee has the right to receive profits and rents accruing from the property. The mortgagor does not bind himself personally for repayment of the mortgage money. The mortgagee (lender) therefore cannot sue the mortgagor for repayment of the mortgage debt. He cannot file suit for sale or foreclosure of the mortgaged property. The mortgagee is left with only one remedy i.e. he can appropriate the rents/profits towards liquidation of mortgage money and interest thereon.

Bankers do not advance against such mortgage.

4. English mortgage

The mortgaged property is transferred absolutely to the mortgagee. That is, all interests and rights in the property are conveyed. It is different from simple mortgage. Thus the English mortgage is entitled to immediate possession of mortgaged property. The mortgagor binds himself personally to repay the mortgage money.

The property is reconveyed (transferred) to the mortgagor upon repayment of mortgage money.

In the case non payment of mortgage money, the English mortgagee (cannot sue for foreclosure but) can sue for a decree for sale. The mortgaged property can be sold without count’s intervention under some circumstances detailed in section 69 of Transfer of Property Act (different from simple mortgage).

5. Mortgage by deposit of title deeds

Equitable mortgage (as per English law), the mortgagor [owner or his authorised (only constituted) attorney] in any of the notified towns delivers to the creditor (or his agent), documents of title to immovable property (title deeds) with intent to create a security thereon.

The immovable property proposed to be equitably mortgaged (and/or the financing branch) may be located/situated any where in India but the title deeds should be delivered at the notified centre only. If is a sine qua non (an indispensable requisite) for equitable mortgage. A deposit made outside the notified centres creates neither a mortgage nor a charge. The debt may be existing or future.

6. Anomalous mortgage

A mortgage which does not belong to any of the five types is called anomalous mortgage. It possesses a mixed character of any two or more types of mortgages. The understanding of the above aspects will keep the borrowers persons of ordinary prudence and lenders in good stead.

References:

1. The Transfer of Property Act, 1882

2. The Indian Contract Act, 1872

3. The Companies Act, 1956

4. The Sale of Goods Act, 1930

5. SBI Monthly Review, October 1988 to November 1991

6. Ever latest in Banking SBI officers Association, Bhopal Circle

The writer has acquired very vast and wide experience in the largest public sector Bank in India during the period of his service spreading over 38 years, he had stint in specialized areas of credit, international banking apart from plum operational/special assignments Accountant/Credit Appraisal officer/Branch Manager/chief Manager/Manager (Export)/officer-on-special duty at different parts of the country such as Block Head quarter / sub divisional Head quarter / District Head quarter / state Capital / Capital of country at very small Branch / small Branch / Medium size Branch / Large Branches/ Exceptionally Large Branches and Administrative offices / Regional office / Zonal office / Head offices / Central office (Foreign department). The present article is the outcome of what he has experienced/ acquired over the years, in different key/ Plum positions.